A “mermaid” who sued NYPD cops for arresting her when she exposed her breasts at Coney Island’s famous summer parade is now swimming off with the city’s cash after winning a $10,000 settlement.

Amy Gunderson, a former model from Williamsburg, will receive the pay out after city lawyers signed settlement papers yesterday.

Gunderson, 31, who now teaches skydiving in Perris, Calif., was arrested outside the Brooklyn Cyclone’s KeySpan Stadium as she prepared to take part in the 2001 Mermaid Parade wearing nothing but body paint and a thong.

“This reaffirms the right of women to walk around topless, as men do, in KeySpan park, Central Park or a parking lot,” her lawyer Dan Perez said yesterday.

“She should never have been arrested and taxpayers are now going to pay her $10,000, in these difficult economic times, because two uptight police officers couldn’t deal with a women walking topless through a park.”

Gunderson said yesterday she was delighted with the settlement as it reaffirmed women’s legal right to walk topless through a park.

“This is the law and a person shouldn’t be put down just because of the strong opinions of other people, whether they be police officers or managers of KeySpan park,” she said.

The cops, NYPD Inspector Stephen Paragallo and Officer Matthew Venus, handed Gunderson a summons charging her with violating public exposure laws and forced her to wear Band-Aids over her nipples during the parade, court papers say.

Brooklyn judge Martin Karopkin later dismissed the charges after Gunderson’s lawyers argued that her toplessness fell within the definition of entertainment.

City lawyer Deborah Meyer said the city made a “business decision” to settle the case, but admitted no wrongdoing.